EU leaders to decide on compromise to unblock EU budget package

Polish Prime Minister Mateusz Morawiecki (centre) speaks to German Chancellor Angela Markel (seen from back) during an EU summit in Brussels, 14 December 2018. They are flanked by Hungarian PM Viktor Orban (left) and Dutch PM Mark Rutte (right). [Copyright: European Union]

EU leaders will discuss on Thursday (10 December) whether to approve the compromise negotiated by the German presidency to drop Hungary and Poland’s vetoes to the EU budget deal, postponing of the Rule of Law mechanism until EU judges validate it.

After three weeks of vetoes, political posturing, threats and the possibility of being excluded from the stimulus package against the pandemic, Hungary and Poland signalled that they were ready to unblock the approval of the EU’s multi-annual financial framework for 2021-2027 and the recovery fund, totalling €1.8 trillion.

In return, they managed to obtain several concessions to the Rule of Law mechanism, which will need to be approved by EU leaders during the summit on Thursday.

Hungary and Poland veto stimulus against pandemic 

Hungary and Poland blocked the approval of the EU’s seven-year budget and the recovery fund totalling €1.81 trillion, as both countries continued to oppose the rule of law mechanism attached to the EU funds. 

“There is an outline of a provisional agreement on the EU budget and conditionality mechanism,” Poland’s President Andrzej Duda told reporters in Prague following talks with Czech counterpart Milos Zeman.

“Work and discussions are ongoing. This agreement is the result of very great efforts of the Polish and Hungarian parties, but also of the German (EU) presidency,” Duda added, according to AFP.

Germany, which is chairing the EU’s rotating presidency this semester, negotiated with both countries an interpretative declaration to add to the mechanism, seen with great concern in Budapest and Warsaw.

The Rule of Law mechanism would allow for suspending the disbursement of EU funds in cases of corruption, conflict of interest, but also if independence of judges is at risk.

Prime Ministers of Hungary and Poland, Viktor Orban and Mateusz Morawiecki, say that the new instrument represents an intrusion into their national sovereignty, and feared that it could be used against them on other issues, such as migration or LGTBI rights.

The declaration keeps the mechanism intact, but stated that it would not be used arbitrarily. 

Its application “will be objective, fair, impartial and fact-based, ensuring due process, non discrimination and equal treatment of Member States,” reads the text, seen by EURACTIV.com

It also included a reference to the so-called “emergency brake”, whereby a single country could raise a discrepancy with a sanctioning procedure with EU leaders, although unanimity would not be required to activate it. 

The declaration also stated that the European Commission would not activate a procedure against any country until the EU Court of Justice rules on the mechanism, as Budapest and Warsaw intend to challenge its legality before European judges. As a result, the activation of mechanism could be delayed until after the Hungarian elections in 2022.

“The Commission intends to develop and adopt guidelines on the way it will apply the Regulation, including a methodology for carrying out its assessment”, the text said. 

“Such guidelines will be developed in close consultation with the Member States” and “will be finalised after the judgment of the Court of Justice,” the document added. “Until such guidelines are finalised, the Commission will not propose measures under the Regulation”. 

Spanish diplomats said that a majority of member states were ready to accept the inclusion of the EU Court of Justice, even if that implied the postponement of the mechanism. 

Other EU diplomats commented that member states did not express their positions, when the compromise was discussed during the EU ambassadors’ meeting (COREPER) on Wednesday evening. 

Commission considers options for recovery fund without Hungary and Poland 

The European Commission is assessing options to circumvent Hungary and Poland’s veto to the EU budget and the recovery fund, and could come up with a proposal early next year if their blockade remains, a senior EU official confirmed on Wednesday (2 December).

A majority of member states, however, praised the German presidency’s work and said that the compromise was worth look into.

The COREPER went through the compromise “quite extensively” with the assistance of the Council legal service, an EU diplomat said.

If EU leaders accept the declaration on Thursday, diplomats said that the approval process of the EU budget package could be reactivated this week. 

But the first disbursements of the €750 billion recovery fund would not happen before next summer, as the ratification process of the EU budget deal needs to be completed in all 27 member states.

[Edited by Benjamin Fox]

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